Proxy Tax

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Proxy Tax

In the United States, a tax levied on the political or lobbying activity of certain tax-exempt organizations. Subject to certain restrictions, the proxy tax applies to organizations under section 501(c)4, 501(c)5, and 501(c)6. Generally speaking, this includes labor unions, civic groups, chambers of commerce, and similar groups. Unless the organization meets exemption requirements (usually meaning the organization is a veterans' group or volunteer fire department), it must pay the proxy tax on its lobbying efforts. The proxy tax rate is 35%. An organization may avoid the proxy tax if it establishes to the IRS that members do not deduct membership dues, contributions, or other similar amounts on their personal or business taxes.